Where Is Sirius Stock Headed Post Reverse Stock Split?

Sirius XM Holdings (NASDAQ: SIRI), a leading provider of satellite radio, conducted its 1-for-10 reverse-stock split on September 9. This means that shareholders of the stock received one share for every 10 shares they owned. Investors may view reverse stock splits negatively, as they often signal fewer shares and a short-term problem, but it can signal optimism in the longer term. It should be noted that Sirius XM was in no danger of delisting from the Nasdaq stock exchange. Rather, this move was likely done to increase the company’s share price from the $3 to $6 range that it has been hovering in for years, to one that is more likely to attract institutional investors. The company reduced its outstanding share count from well over 3 billion to around 339 million shares. It should be noted that the company’s total market value remains the same post-reverse stock split as the increase in share price offsets the decrease in share count.

Since going public, this is the first stock split in the company’s history. SIRI stock currently trades at almost $26 post-reverse-stock split (as of September 12). We have revised Sirius XM’s Valuation to $29 per share (from a previous (pre-reverse split) $3), based on a $3.07 expected EPS (post-split) and a 9.5x P/E multiple for the fiscal year 2024 – almost 13% higher than the current market price. We also forecast Sirius XM’s Revenue to be $8.8 billion for the fiscal year 2024, down marginally y-o-y. SIRI stock has seen a 53% fall year-to-date. Notably, SIRI’s peer Apple (NASDAQ:AAPL) has seen its stock rise 16% to around $223 YTD. SiriusXM (now Sirius XM Holdings) also completed its merger with Liberty Sirius XM Group (Liberty Media’s Sirius XM tracking stock) this week.

The increase in SIRI stock over the last 3-year period has been far from consistent, although annual returns were considerably less volatile than the S&P 500. Returns for the stock were 1% in 2021, -3% in 2022, and -4% in 2023. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is less volatile. And it has outperformed the S&P 500 each year over the same period.

Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could SIRI face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

SIRI revenue growth fell 3% year-over-year (y-o-y) in its second quarter of 2024 to $2.2 billion. Net income for the second quarter of 2024 was $316 million resulting in diluted earnings per share of $0.08, up from $310 million for the same quarter of 2023. Under its namesake business, the company had 33 million self-pay subscribers, while self-pay subscribers decreased by 100,000 during the same period. Self-pay subscriber churn was 1.5%, and the segment’s revenue of $1.6 billion was down 5% y-o-y, due to a smaller average base of self-pay subscribers and a $0.42 y-o-y decrease in average revenue per user (ARPU) in Q2. For the Pandora and Off-Platform business, the company had 6 million self-pay subscribers, losing 41,000 in Q2. Its segment revenue rose 2% to $538 million.

For the full year 2024, SIRI mentioned that it expects total revenue of approximately $8.75 billion, an adjusted EBITDA of approximately $2.7 billion, and $1 billion in free cash flow this year. Sirius XM naturally suffered a setback due to the pandemic – with a stay-at-home mandate at workplaces, institutions, and family gatherings. Even with the return of normalcy at present, the company’s business has been stagnant, rather the company saw its first ever revenue decline in FY 2023. That said, Sirius will have to focus solely on its content to compete with the bigger and more resourceful competitors in order to grow its business.

It is helpful to see how its peers stack up. SIRI Peers shows how Sirius stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 9/13/2024
[2] Cumulative total returns since the end of 2016